China matters, and the United States knows it

Published 8:00 pm, Saturday, August 1, 2009

If photo-ops measured importance, then G-8 meetings would be the most important economic gatherings on the face of the Earth.

Not only would that be a wrong assessment, but it would ignore the rapidly expanding role China now has in shaping global policy in this century. That's why a landmark meeting between U.S. and Chinese officials in Washington this week deserved more attention than it received.

China is the world's third-largest economy and the major holder of U.S. debt, a relationship that has been both a blessing and a curse. Without China's truckload purchases of debt that helped finance U.S. consumer lifestyles in the 1990s, the American bull economy wouldn't have occurred -- and probably neither would the catastrophic economic bubble and current recession.

China was right to ask at this week's meeting just how much more red ink the United States is willing to incur. With the U.S. deficit exceeding $1.8 trillion this year and likely to stay at high levels for many years, China is right to worry. It's certainly not a coincidence that U.S. officials took the opportunity to reassure China's delegates that there will be an eventual end to America's credit spree. China and the United States are too deep into each other's economic futures to do anything other than ride this one out.

Likewise, the United States was right to ask when China is going to open its borders to more foreign goods, make doing business in China easier and augment its export-driven economy with more goods being consumed at home. In other words, they're asking when China is going to act more like a major fulcrum in the global economy and less like a low-cost exporter, and that's not an unreasonable question.

We'll reserve final judgment until we see how this new dialogue ultimately plays out. Promises are easier to make than keep -- especially after the cameras stop rolling. The U.S.-China relationship has had similar moments of cooperation before, followed by trade spats and other nasty exchanges.

By the end of the meetings, the U.S. promised to rein in the budget deficit and to encourage household savings. For its part, China vaguely promised cooperation on climate control and to moderate its low-cost export juggernaut. And for a change, both sides talked openly about the need to cooperate on global economic issues and to produce "balanced global growth." While the economic pledges are still mostly diplomat-speak, these modest declarations could represent a new starting point in the China-U.S. economic relationship.

If China and the United States didn't realize it before, there should be no doubt now. This trans-Pacific marriage has more than a few rough patches, but the only wise course is for both sides to stick it out.